Classifications of Entrepreneurs

I am an entrepreneur, and believe I have the qualities of one. However, I feel that the term Entrepreneurship is used too generically. An entrepreneur could be one who opened his coffee shop. It could be a scientist who made a new technology and started his own business. It could be a person who invested a lot of money to research a new technology. It could be a high school kid starting a lawn mowing service. It could be someone importing goods that bring millions in transaction. It could be someone finding students to tutor or making money through a one-page website. So what does it mean when I say “I am an entrepreneur?” Which one am I? How do people know?

Yes I understand the key characteristic is the Entrepreneurial Spirit, in which flows common between successful entrepreneurs, big and small. Many “impressive” entrepreneurs started off doing a simple service, hence the common reference of the lemonade stand. But I am interested in classifying different kinds of entrepreneurs. Just like Eskimos have more than a dozen words for different kinds of snow, entrepreneurs should have clearer terms for what they do.

I think the type of entrepreneur should be identified by these traits:

- Scale: how many employees, customers, revenue etc.
- Difficulty in Initiation: requires permits and regulations, fund raising, new technology, patents.
- Opportunity Cost: what he needs to give up in order to become an entrepreneur. Could they make $200,000 a year anyway if they didn’t start the business?
- Creativity/Originality: truly created something new in society, or just following the trend.
- Risk Associated: what do you lose if you fail? Similar to scale but more direct on the individual him/herself.
- Past Ventures/Experience: whether or not this venture is the first one. Also, one who failed once is often greater than one who succeeded once, because anyone could fail, but it is more entrepreneurial for one to fail and not give up.

With these means of measurement, I made some classifications. Some entrepreneurs fit in two or more of these categories, but I see that as a problem. In addition, many people start with one, acquire experience, and slowly move up the “respectability” as an entrepreneur.

Starting Entrepreneur:

Usually a sole proprietorship (just him/herself) with friends as customers. It’s most often a service that requires time but little or no investment. There is few opportunity cost as the Starting Entrepreneur are mostly students who don’t need to worry about money and have little other means to make life better. The tasks are usually not extremely original, but special for the qualifications. Needless to say, they have limited experience.

Commodity Entrepreneur:

These are entrepreneurs who make a healthy investment to start something that is somewhat saturated in the market. This means you can find many similar businesses that do the same thing. Most restaurants and coffee shops, as well as common commodity businesses are within this category. They usually follow what the Opportunity Entrepreneur does after it becomes common and populated. When asked why they started that business, it is usually not because they see a special demand or see how he/she can do better than the market, but simply because they think it would be interesting (“I always wanted to open a flower shop”), or they are good at the technical work of that business. Real Estate would be categorized as Commodity Entrepreneurship.

Network Marketing Entrepreneur:

For those who don’t know, this is the pyramid way of doing business, where you do business, and you recruit other people to do business. They do the same, and you get some commission from those under. It’s legit business as they truly create some value, as long as the bottom doesn’t get screwed at the end. I feel like the initialization process is too easy, and the opportunity often comes to search for you (with full force too), not the other way around (entrepreneurs create opportunities themselves). I feel this is more of a marketing/manager then an entrepreneur, as even though one needs to make entrepreneurial tactical decisions, nothing truly new is created. You just follow someone’s model, use someone’s equipment, and have relatively small investment and risk. 80% of the business is worked out for you. Most people can start with any past experience (as a Starting Entrepreneur). However, it is true that the same problems with stress and creativity runs in Network Marketing, so it is still considered entrepreneurial.

Opportunity Entrepreneur:

Opportunity Entrepreneurs look at the newest trends, figure out what works, and does it. They usually identify some competitive advantage and start something that exists, except better. The scale is usually decent and initial investment is usually pretty large. Starting is difficult because one needs to go through all regulations and registrations as well as have decent capital. Risk is relatively high because it is hard to rightly evaluate which market trends can be followed and have the technical abilities and timing to do it well. Creativity/Originality is based on how the entrepreneur picks the business and the creative processes to get a solid edge, but it is truly innovative. In an Economics graph of supply and demand, these are the people that “shift the supply curve forward” when there seems to be profit in an industry. Service Companies are often examples of Opportunity Entrepreneurship. Finally, Opportunity Entrepreneurs usually have some past experience as a Starting Entrepreneur and such.

Innovative Entrepreneur:

These people create something new, something no one else has done in an industry. They identify something that does not exist yet is missing, and they do what it takes to make it happen. The scale usually doesn’t need to be huge, but at least decent in this area. The difficulty in initiation is usually quite high, depending on each industry. However, the strongest characteristic about an Innovative Entrepreneur is that they are extremely innovative and creative, and are willing to take huge risks, as nothing has indicated this business would work at all!

High Tech Entrepreneur:

The High Tech Entrepreneur is probably the most respectable in terms of being entrepreneurial. Instead of creating improvements or introducing something good in an industry, they create industries. The guy who invented computers and started the business created the computer industries. The people who invented automobiles and started to sell it started the automobile industry. As you can tell, it is incredibly hard to initiate such a business. Investments, creativity level, and risk are all extremely high. You are investing for something that might not even be created! (let along being tested and proven) These companies usually need to be backed up by Venture Capitalists, and it also has a high chance of failing due to technology competition (someone might be already almost done with what you are trying to make when you are still mindlessly inventing). It takes a true Entrepreneur to spend this big amount of time, money, money forfeited elsewhere, energy for this huge a risk. However, it must not be confused between Inventors and Entrepreneurs. There are cases where the Inventor is also an Entrepreneur (or Entrepreneurial), but many times simply knowing the technological work of making a new product does not make one an Entrepreneur. Inventors usually partner up with the most respectable High Tech Entrepreneurs BEFORE they have invented. If the partnership is after, then not so much due to less risk, less investment, and less/no originality. Or, inventor creates a great product, but not much people knows about it due to his lack of business skills, until maybe years later some Opportunity Entrepreneur picks it up and brings it to the world.

Fake Entrepreneur:

Some people go on their ventures because they simply want to make a lot of money and/or want to be their own boss. These are wrong motives and usually result in a failing business (unfortunately, this is the majority of people who start businesses, as well as the reason why so many businesses fail.) But yea, they’re still considered entrepreneurs because they do the technical work of an entrepreneur, just not the entrepreneurial work.


After this is clarified, I can better identify myself as an Opportunity/Innovation Entrepreneur. Globies is Opportunity Entrepreneurship because it just tries to search for opportunities around to make money, instead of creating anything original. FD Network is Innovation Entrepreneurship because it is providing some new in an existing market (though non-profit).

Eventually I would like to use the capital from Globies to become an Innovation Entrepreneur all the way, be it sponsor FD Network or create other more original companies. High Tech Entrepreneurship is probably too technical for me, but perhaps if I find a good Engineering partner or so it might happen.

Entrepreneurship makes life worth living.

(Note: It should be clear and stressed that these notes are my, Yu-kai Chou’s, opinion only. Feel free to disagree and to discuss, but don’t burn me for my ignorance or beliefs.)